What Really Happened Between La Kaffa And Loob Holding? Bryan Loo Tells Us Everything
In an exclusive interview, Loob Holding CEO Bryan Loo tells us what he thinks triggered the decline in the business relationship between both parties.
In just six weeks since the termination of its master franchisee contract, Loob Holding seems to have bounced back from the Chatime debacle, having launched Tealive to replace the popular tea franchise last week
Following the launch of Tealive on Friday, 17 February, 161 out of 165 existing Chatime outlets are set to move forward with the new brand.
However, the fact remains that the bad blood between La Kaffa - the Taiwanese company who owns the Chatime brand - and Loob Holding has yet to be resolved
One month after announcing the termination of the contract on 6 January, La Kaffa held another press conference on 3 February, claiming that Loob Holding had breached the master franchisee contract by using unapproved ingredients and for owing La Kaffa more than a year's worth of royalty fees. The Taiwanese company's allegations over the use of "unapproved ingredients" also raised questions about Chatime's halal status.
In response, Loob Holding CEO Bryan Loo denied all of La Kaffa's "false and malicious" claims, clarifying that the ingredients used are halal-certified by JAKIM. Loo also stressed that they would rather not engage in litigation through the media, preferring to let the relevant legal processes take its course.
What actually transpired between both parties that it escalated to this point? And what does Loob actually have to say about the allegations?
We sat down with Loob Holding CEO Bryan Loo to get the full (untold) story and to set the record straight:
1. There is a long of history of business disagreements between both companies in the past few years, but it was one particular act of bad faith in February 2016 that triggered the decline of the relationship
"In February 2016, they quietly launched this 3-in-1 Chatime milk tea powder in the supermarkets without our consent and knowledge. We only realised two months later," Loo said.
"After I found out, I flipped. It's a conflict of interest, if this project is not run by the same people running the retail outlets. So when this happened, it means that there is no trust or respect at all," he explained, adding that when Loob told La Kaffa to pull the product off the shelves, all they heard back from the franchisor company were excuses and delayed answers.
Hence, Loob started an arbitration case against La Kaffa in Singapore about four months ago. Loo further revealed that his team had actually proposed a similar project two and a half years ago, hoping to initiate a joint venture with La Kaffa.
As an aside, this incident lines up with La Kaffa executive vice-president Teresa Wang's statement during the 6 Jan press conference, that La Kaffa has actually been preparing to take back the Chatime franchise in Malaysia for a year.
2. Loo believes that Loob Holding's aggressive expansion plans over the next two years contributed to La Kaffa's desire to take over Chatime operations in Malaysia
Loo divulged that the franchisor company was made aware of Loob Holding's plans to establish outlets in Shell petrol stations (as announced in June 2016) and to populate retails spaces in MRT stations (announced in October 2016).
"We were tapped to deliver a hundred outlets at Shell by 2018. There were also the MRT stations that are gonna be ready this year, that alone could give us a few hundred more outlets on top of what we already have," he explained.
"We thought that they would bless us, but they became greedy."
3. Prior to the termination, Loob Holding was under the impression that La Kaffa came to Malaysia to introduce their new leadership team. In fact, Loo revealed that they were served a termination notice only on 5 January.
"They served us the notice on 5 January. But four weeks ago, when they called to say they wanted to meet up, the original agenda was to introduce their new leadership team and to invite us for a Global Workshop that was happening in Bali," Loo explained.
It was a whole different story once La Kaffa's people arrived in Malaysia.
"So they came, only to tell us that the management has discussed and made the decision to terminate us as a master franchisee. That caught us by surprise. What's going on? Suddenly, it's the end of the world," he said.
4. The next day, 6 January, La Kaffa sprang another surprise on Loob Holding. That morning, the Taiwanese company held a press conference announcing that they will be terminating Loob's master franchisee contract.
"Before they left, they still told us to not worry about the termination, as 'everything can be discussed'. Then, the next day, at 9.00am, bam! Press conference," Loo said.
"How could you leave us with the mindset that 'everything can be discussed', only to turn the tables against us the next day? Malaysia being the largest market, contributing 50% of total revenue to them, we see no reason why you want to terminate us. But they left us with that mindset while they were buying time to prepare," he added.
5. As Loob Holding scrambled to come to terms with the termination, La Kaffa acted quickly to execute their plan to take over operations of Chatime outlets in Malaysia
"So, they terminated us on Thursday, and held a press conference on Friday. On Saturday, they contacted all our franchisees with the intention to entice them with better packages. On Sunday, they contacted our key management, all our people, to entice them to join their team. They even contacted our suppliers and malls," Loo divulged.
6. Ultimately, Loob Holding decided that there is no way they will continue a business relationship with La Kaffa as there is no longer trust and respect between both parties
"If these people can do all those things to us now, they will do it again. We feel that there's no longer trust, respect, and integrity in the relationship. So, the last option is to move on," Loo said.
7. As for La Kaffa's allegations against Loob Holding, Loo explained that the "unapproved ingredients" were actually additions to the menu through partnerships with brands like Horlicks and Cadbury
"When they say we're using unapproved ingredients, it's actually from the collaborations we did to localise and help us remain relevant over the years," Loo explained.
8. What about La Kaffa's claims that Loob owed them over a year's worth of royalty fees? Loo said that he is unable to reveal much due to legal restrictions, but clarified that La Kaffa's allegations were grossly exaggerated.
According to Loo, Loob Holding only held back their payment of royalty fees for the past quarter, under the advise of their lawyers. Beyond that, he explained that he cannot disclose any more details as they are part of arbitration proceedings, which are P&C until the end of arbitration.
Despite all that has happened, Loo said that the experience has taught him "more love than hate", adding that it's his people and the consumers that motivate him when the going gets tough
"I owe a lot to my people, who have done a great job in the last six years. As a leader, you can dream big, but it doesn't matter how big your dreams are if you don't have people you can depend on to make them happen. So I'm very grateful that we have a balance of people with crazy, wild ideas, and people who are very good at executing them," he said.
He also said that he is grateful for the overwhelming support and assurance from consumers, as it's this positive sentiment that gave him and his team courage to move forward.
"We were very touched, and we felt that this is a real milestone for us. It's not about how many cups we serve a month, it's about how many lives we've touched with what we do, the emotional engagement we've created with the brand."
And move on they did. Tealive was officially launched last week, so we talked to Bryan Loo to find out what Malaysians can expect from the newest player in tea culture: